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Calamity and Opportunity – Earnings: BNS, BMO, NA, LB, NFI

Escalating tensions between the two largest world powers have the potential to get out of hand. This is also a situation where opportunity lurks in the wings.

Both the US and China have plenty of punching power. The ultimate referee, for as long as good sense fails to prevail, are the financial markets. The pain if markets plunge will speed up finding middle ground. The stakes are high, but one key player that may well be absent are the central banks. The bond markets however don't believe central banks will stand aside, having already bid in several interest rate cuts. Comments this week focus on the near term divergence between a stock market that is trending lower and bonds where prices are rising, pushing yields lower.

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